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DR David Reilly
DJ Dan Jones
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DR: Hello, and welcome to this Deloitte pod cast. I’m David Reilly, and in this programme I’ll be discussing the Deloitte Football Money League 2008 with Dan Jones, head of the Sports Business Group at Deloitte. This is the 11th year of the publication, profiling the richest 20 clubs in the world’s most popular sport. The Deloitte Football Money League is the most contemporary and reliable analysis of clubs relative financial performance. You can download a copy of Money League on Deloitte’s website, deloitte.co.uk/sportsbusinessgroup, where you can also find reports from previous years. Well, Dan, what’s the big story this year?
DJ: Well, the big story this year is that Real Madrid stays at the top so that’s their third year in a row, their hat-trick at the top of the table. They’ve achieved that through a variety of means, but basically they’ve grown revenues across the board. Historically for Real Madrid commercial revenues, sponsorship, licensing deals, those sorts of things have been driving that growth. This year, match day, broadcasting revenues particularly have gone up as well, so across the board really. First team ever to get over €300 million of revenue, a feat that Manchester United have also achieved this year; and looking across the rest of the table the top ten is pretty much as we’d expect. The only team that dropped out of last year’s top ten is Juventus, who’ve had very well publicized issues with their relegation and so on. But remarkably Juventus, despite playing in the second division in Italy, still comes in the worldwide top 12 for revenue, which is a phenomenal achievement. Not one I think we will ever see repeated.
DR You mentioned Manchester United there, and they’re back up to second place this year. What did they do to climb back into that position
DJ: Well, Manchester United, the big thing for them has been the redevelopment of Old Trafford, so they’ve expanded the capacity by 8,000 places by filling in the corners of Old Trafford. That’s generated a lot more revenue for them. Commercially they continue to go from strength to strength, new shirt front deal with AIG; and of course next year they’ve got the benefit of the new Premier League broadcasting deal as well. So we would expect that Manchester United will be pushing very hard again for that top spot soon. And of course the other great thing that Manchester United had in the 2006/7 season is they got back to absolute peak performance on the pitch; they won the Premier League title, they got to the semi finals of the Champions League, the finals of the FA Cup. So it was really an all-round very, very successful season for them.
DR: There seem to be a lot more German clubs featuring in the top 20 this year. Do you think there are specific reasons for that?
DJ: Yes, the German success story is an interesting one. I think what that shows is that Germany, probably aside from England, is the best at developing a balanced business model. Particularly, generating a lot of revenue from their stadium, and that is a difference to clubs in for example Italy and most of the clubs in Spain. So Germany’s got a big benefit out of having hosted the World Cup really, because that’s helped prompt stadium development. So we’ve now got four German clubs in our top 20, albeit the highest ranked one is Bayern Munich who are in seventh place. So it’s mostly towards the lower reaches rather than the upper reaches of our top 20.
DR: On the other hand, British Premier League teams again feature the most of any country, don’t they? So they’re still the financial champions in some sense, aren’t they?
DJ: Absolutely. The Premier League has got six representatives in the top 20, so once again the most represented country is England. And in terms of why that is, I think there’s two key strengths to the Premier League that not all other countries share. Number one is that they have invested a lot of money in their stadia. I talked just now about Germany and their investment, but in England that’s really been across the board from the early ‘90’s onwards, and that has led to a lot more revenue generation from the stadia. So in terms of revenue per head generated from people going to the match, England is ahead of people, and that is due to the quality of the facilities that have now been developed. The second thing about England is it has a very lucrative, collective television deal. Now remember, this is before the new Premier League deal figures come through. So even on the old deal we were getting six in the top 20. I think next year we could see half of our top 20 being made up of Premier League clubs, which would be a remarkable achievement. Outside of England and Germany; in Italy, in Spain, in Scotland, in France, it’s really only the elite of clubs who are getting in there. We tend to see one of the old firm from Scotland in every year, Lyon from France, and then the biggest clubs in Italy and Spain also make the list.
DR: Now some would argue that you only look at one way to measure a club and that’s through its financial muscle, but you’ve addressed that in this year’s report, haven’t you?
DJ: Absolutely. We, I mean we are predominantly obviously a financial based firm and so we look at a financial measure; it’s called the Money League, after all. But we do consider, you know, what’s the most appropriate financial measure? So we’ve always based it on day-to-day football operations turnover. Now there are some teams who would say well, but we have a lot of extra revenue that you don’t recognize through that. Whether it’s through non-core football activity, for example, Arsenal have made great revenues through property development from the old Highbury; or through the way that they do their deals, so Manchester United for example would say but the way we do our deals with some of our commercial partners is that we just, we just get the profit element, and actually there’s more revenue out there that you’re not recognizing. But we still have stuck with our measure that we feel is the best and fairest and most reliable way of comparing across the board, and of course there are other measures like profitability for example, where Manchester United would come out on top. But we still feel our measure is the best across the board. We’ve also looked this year at, you know, does the financial side back up what’s going on on the pitch? And it’s very, very interesting that the correlation between our league table of revenues and long-term success in the Champions League is very, very close. Very close. And that sort of gives us confidence that it’s a reasonably sensible measure that we’re using, but it also shows that success in the Champions League breeds financial success, which breeds further success in the Champions League, and there is that virtual circle.
DR: So is that going to continue then, the top clubs are just going to get richer and richer, and pull away from the rest?
DJ: Well, I think we’re already seeing a very clear European top ten developing, and the gap between the top ten and the next is getting wider. So we’re definitely already seeing that develop. The interesting thing about the rich getting richer and the rest not, is that I don’t believe that’s the case. I think everybody is getting richer. As I said, you know, this is the fastest growth rate we’ve seen in revenue for our top 20 for the last few years, it’s up 11% this year; all clubs are getting richer. You know the TV deals in the football league for example below the premier league have gone up to new record high values. So the whole state of the game is very, very healthy, so even the clubs in the lower reaches are getting absolutely richer. Of course the issue for them is that the relative gap between them and the very richest clubs is growing.
DR: And are the richer clubs growing at an even greater rate?
DJ: Yes, I think that’s right. I think yeah, the richer clubs are achieving revenues now that are remarkable in a historical context. So Manchester United was the only team with revenues above €100 million when we first did this report just ten years ago; next year I think €100 million will be the minimum threshold. €100 million will be the minimum threshold to get into the top 20, and that’s quite a remarkable turnaround.
DR: Yes. What about the future then, what are your predictions for next year?
DJ: Well, I think next year there’s a couple of predictions really; the strength of the English clubs will just come through even more, and I think the clubs who are at the moment in the lower reaches of our top 20 are at risk of relegation, if you like; and that echoes what we saw last year actually, the bottom four last year dropped out of the top 20. I think that’s definitely going to be a theme, more English clubs coming through. I do think we’ll see a lot more growth again next year, and I think that top ten will return to its natural order. We’ll see Juventus move back up into the top ten.
DR: Fascinating stuff. Dan Jones, Thanks very much.
DJ: Thank you.
DR: And that’s it for now. Remember, you can get your own copy of the Deloitte Football Money League 2008 by going to deloitte.co.uk/sportsbusinessgroup. Or if you’re on the move, and would like the top 20 rich list direct to your mobile, text ‘football’ to 82088. Until next time, thanks very much for listening.
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